You are looking at Apple's next iPhone. It was found lost in a bar in Redwood City,…
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The timeline of the night goes something like this: On March 18th, an Apple engineer with a top-secret, next-generation iPhone prototype went to a bar. It was his birthday. Some time later, he left the bar. His phone, left on a barstool, didn't.

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What followed was something of a juggling act: a drunk patron found the phone, and assumed it belonged to a member of another party at the bar, with whom he left the handset. A member of the party recognized, vaguely, that the phone was something out of the ordinary. According to what we'd assume to be standard Apple security protocol, the phone was bricked almost immediately. (In case people are concerned that Apple is only finding out now that a phone went missing, make no mistake, they knew the engineer lost it almost immediately.)

Some time later, it was passed to us. (We paid $5000 for it.) For nearly a week we investigated it thoroughly, ascertained its authenticity, then posted about it. But what about the three weeks before that? Three weeks during which Apple presumably tried—and obviously failed—to get their phone back. Was Apple looking for it? Early on, the discoverer actually tried to give the phone back. So what went wrong? And how did this happen in the first place?

Well, how can I explain this? I got some interesting calls today. It was Apple. And they wanted…
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A Failed Handoff

So you recognize this handset as an iPhone—it looks and works like an iPhone, and it's even disguised as an iPhone 3GS. It's not password protected (!), it's running an OS that looks like the normal iPhone OS only a little different, and it has Facebook and other apps running. (Our source says he didn't poke around too deeply.) Hours later—before the next morning, actually—it didn't work.

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The assumption is that it was wiped remotely as soon as either the engineer or Apple realized it was lost—probably later that night, not just to lock down the features of the new hardware, but to avoid spilling the beans on the new operating system. So, with a bricked phone in hand, an obvious course of action would be to call Apple. And as we reported before, that's exactly what happened—our source started dialing Apple contact and support numbers. He was turned away, and given a support ticket number.

Here's how it went down, allegedly, from the perspective of the Apple reps who got the call:

I work for AppleCare as a tier 2 agent and before the whole thing about a leak hit the Internet the guy working next to me got the call from the guy looking to return the phone. From our point of view it seemed as a hoax or that the guy had a knockoff, internally apple doesn't tell us anything and we haven't gotten any notices or anything about a lost phone, much less anything stating we are making a new one. When the guy called us he gave us a vague description and couldn't provide pics, so like I mentioned previously, we thought it was a china knockoff the guy found. We wouldn't have any idea what to do with it and that's what sucks about working for apple, we're given just enough info to try and help people but not enough info to do anything if someone calls like this.

If the guy could have provided pictures it would have been sent to our engineers and then I'm sure we'd have gotten somewhere from there, but because we had so little to go on we pushed it off as bogus.

And seriously, what else could have happened? There is no way—not a chance—that a middle-level customer service rep would have known anything about the next iPhone. Put yourself in his theoretical shoes:

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Hello, thanks for calling AppleCare

Hello. I think I have some kind of iPhone prototype, or something!

What?

Yeah, it's kinda square, and it doesn't work. I found it in a bar.

Ok! Thanks for calling.

I mean, right? And to address the obvious irony here, yes: Apple's secrecy about new products is legendary. And perhaps if they weren't so secretive, the caller's message could have made it up to someone who might've known what to do with it. It also would have helped if the caller's (true) story didn't sound so utterly ridiculous.

Find My iPhone (Or Not)

So why couldn't Apple track this thing down? Apple's choices at this point were a lot like any other iPhone owner's would have been:

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• Call or text: Our sourced used the phone software for a very short time. He didn't check the messages or call history, but said there was no notification box indicating a text or missed call. The phone was found dead in the morning, meaning that someone could have text or called during the night.

• Find My iPhone: But what about the phone's GPS? Apple has a consumer product that lets you find lost phones, and shut them down remotely. It's called MobileMe. It works pretty well! Except, it's broken in the latest version of iPhone OS.

It's basically a given that the phone was running a test version of Apple's iPhone software, called OS 4. We've tested the software, which will presumably launch with the next version of the iPhone hardware, on current iPhone hardware. (For more on that, check here.) One thing we didn't notice, though, is that MobileMe's Find My iPhone feature, which lets you find your lost phone on an online map in a matter of seconds, doesn't work in OS 4—yet. In other words, Apple likely couldn't track this phone because of a beta software bug.

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• Shut it down: Another MobileMe feature that doesn't yet work with OS 4 is remote wipe, but the iPhone's Exchange Server integration includes its own support for remote wipe, which means that Apple would have been more than able to nuke the iPhone from afar, anyway. Evidently, that's exactly what they did.

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And of course, Apple could have an entirely different tracking service, or even a different build of the OS in which Find My iPhone works fine. But assuming the phone was running something resembling the iPhone OS 4 beta many people have been using for the last few weeks, the pieces fit. And since it was running the new, unreleased operating system, these decisions make even more sense.

Question Zero

It's easy to piece together how this whole fiasco played out after the phone was lost, but the biggest mystery is why this phone left the Cupertino campus in the first place. The rest of the story fits with Apple's identity: regular employees weren't privy to Apple's secret products, so they dismissed them as a hoax; Apple's beta software doesn't support one of Apple's services, so they couldn't use the one feature that could have saved their asses.

The only uncharacteristic part of whole story is that Apple had employees using top-secret hardware in the wild, amongst the masses, without so much as a simple password lock. (Though Apple has a history of public testing: They sent 200 field technicians out to vet the first-gen iPhone.) What about Apple's storied (and absurd) internal security protocols? The leak-hunting Gestapo? Was this an unprecedented, utterly unique slip, or has everyone been giving Apple too much credit? They're good at keeping secrets, sure, but they're human.